Limited Partnerships

Question 1

A limited partnership (“LP”), like a general partnership, is

Answer 1

an association of people who have agreed to co-own an ongoing business for profit.

Question 2

Unlike a general partnership, limited partnerships

Answer 2

consist of both general partners and limited partners.

Question 3

General partners in a limited partnership have the same powers, rights, duties, and exposure to liability as

Answer 3

general partners in a general partnership.

Question 4

Limited partners share in the profits and losses of the business. But they do not…

Answer 4

participate in the management of the LP, they are not agents of the LP, and they are not exposed to personal liability for the debts and obligations of the LP; they are passive investors in the LP’s business.

Question 5

Florida limited partnerships are governed by the

Answer 5

Florida Revised Uniform Limited Partnership Act of 2005 (RULPA).

Question 6

The formation of a limited partnership involves more formality than the formation of a general partnership; it requires:

Answer 6

Filing a properly executed certificate in the office of the secretary of state.

Question 7

If there is substantial compliance with this requirement, a limited partnership is formed when:

Answer 7

the department of state files the certificate

Question 8

To be properly executed, the certificate of limited partnership must be signed by ALL general partners listed in the certificate and must state:

Answer 8

a. Name of the limited partnership
b. Name and business address of each general partner
c. the address of the limited partnership’s designated office; and
d. the name and address of the registered agent.

Question 9

The name of a limited partnership must contain

Answer 9

an indication of its status as a limited liability entity; specifically, its name must include the phrase “limited partnership,” the term “limited,” or an abbreviation such as “L.P.” or “Ltd.” or “LP.”

Must be distinguishable from all other entities

May include the name of a partner

Question 10

Authority to Manage and Power to Bind

Answer 10

General partners have exclusive right to co-manage the partnership’s business and to act on the partnership’s behalf

Matters relating to the activity of the limited partnership may be decided by: a majority of the general partners

Question 11

The following actions require the approval of all general partners…

Answer 11

(1) amending the partnership agreement or the certificate of limited partnership, including any statement changing the status of the limited partnership to a limited liability limited partnership or deleting a statement that the limited partnership is a limited liability limited partnership;
(2) admitting a limited partner
(3) admitting a general partner
(4) compromising a partner’s obligation to make contributions or return an improper distribution
(5) expelling a limited partner
(6) redeeming a transferable interest subject to a charging order
(7) dissolving the limited partnership
(8) approving a plan of conversion or a plan of merger
(9) selling, leasing, exchanging, or otherwise disposing of all, or substantially all, of the limited partnership’s property, with or without good will, other than in the usual and regular course of the limited partnership’s activities.

Question 12

The expulsion of a general partner shall require the consent of all of the

Answer 12

other general partners and all limited partners

Question 13

Expulsion of a limited partner requires the approval all

Answer 13

general partners and all other limited partners.

Question 14

The duty of loyalty and the duty of care are:

Answer 14

ordinarily duties of general partners only

Question 15

For limited partners, their duty is:

Answer 15

less burdensome obligation of good faith and fair dealing

Question 16

However, to the extent that a limited partner is vested with or is delegated management powers or responsibilities under the partnership agreement, the limited partner’s exercise of such power and responsibilities will be subject to:

Answer 16

duties of care and loyalty

Question 17

A limited partner does NOT violate a duty or obligation under RULPA or the partnership agreement merely because

Answer 17

the limited partner’s conduct furthers his or her own interest.

Question 18

All general and limited partners share in the profits, losses, and distributions of the limited partnership in proportion to:

Answer 18

the amount they contribute

Question 19

However, no distributions can be made by the limited partnership if, after the distribution:

Answer 19

(1) the limited partnership’s total assets would be less than the sum of its total liabilities; or
(2) the limited partnership would not be able to pay its debts as they become due in the ordinary course of the limited partnerships’ activities

Question 20

With respect to information provided by or obtained from the limited partnership, the limited partnership may impose:

Answer 20

reasonable restrictions on the limited partners use of the information from the limited partnership

Question 21

There is also a right for a limited partner to have access to

Answer 21

required information.

Question 22

“Required Information” refers to information that, pursuant to statute, every limited partnership must maintain at its designated office. This includes such information as:

Answer 22

(a) name and address of all current partners;
(b) identification of which partners are general partners and which are limited partners;
(c) copy of filed certificate of limited partnership and, if any, certificates of conversion or merger;
(d) copy of any partnership agreement;
(e) copy of income tax returns and any financial statement for the three most recent years; and
(f) copy of three most recent annual reports delivered to the Department of State.

Question 23

Upon 10 days demand, a limited partner may inspect and copy “required information” during regular business hours in the limited partnership’s designated office even if:

Answer 23

the limited partner has no particular purpose for seeking the information

Question 24

Upon demand, a limited partner may inspect and copy information regarding the activities and financial condition of the limited partnership IF:

Answer 24

(a) the limited partner seeks the information for a purpose reasonably related to the limited partner’s interest as a limited partner; AND
(b) the information sought is directly connected to the limited partner’s purpose; AND
(c) the demand describes with reasonable particularity the information sought and the purpose for seeking it

Question 25

Limited partners have the right to all information material to

Answer 25

a decision to be made by a limited partner.

Question 26

With respect to limited partners who have dissociated, they may only inspect and copy the “required information” only if:

Answer 26

(1) he or she seeks the information in good faith and for a purpose related to his or interest as limited partner,
(2) the information sought pertains to the period during which he or she was a limited partner and is directly connected to his or her purpose, AND
(3) he or she delivers a demand to the limited partnership that describes with reasonable particularity the information sought and the purpose for seeking it.

Question 27

An obligation of a limited partnership, whether arising in contract, tort, or otherwise:

Answer 27

is not the obligation of a limited partner EVEN IF HE PARTICIPATES IN MANAGEMENT AND CONTROL OF THE LIMITED PARTNERSHIP

Question 28

Liability when a person erroneously believes that they are a limited partner.

Not liable if—when he realizes the mistake—the person:

Answer 28

(1) signs and files with the Department of State an appropriate certificate of limited partnership, amendment, or statement of correction; or
(2) signs and files with the Department of State a statement of withdrawal from the business.

Question 29

A person who makes an investment is liable to the same extent as a general partner to any third party that enters into a transaction with the enterprise…

Answer 29

believing in good faith that the person is a general partner, before a statement of withdrawal, certificate of limited partnership, amendment, or statement of correction that shows the person is not a general partner is filed with the Department of State.

Question 30

A general partner in a normal partnership can rightfully dissociate by express will from a partnership at will (assuming there is no violation of an express provision of the partnership agreement). In contrast, a general partner in a limited partnership can

Answer 30

never rightfully dissociate by express will before the termination of the limited partnership. Such a dissociation by a general partner is always wrongful.

Question 31

Limited partners have no right to dissociate before

Answer 31

the termination of the limited partnership; a limited partner’s dissociation is always wrongful.

Question 32

The following will cause a general partner’s dissociation but not a limited partner’s dissociation:

Answer 32

a. partner’s bankruptcy;
b. appointment of a guardian for the partner;
c. judicial determination that the partner has become incapable of performing his duties under the partnership agreement.

Question 33

Consequences of Dissociation

For general partners, the consequences are…

Answer 33

the same whether they are general partners in a general partnership or a limited partnership.

Question 34

Consequences of Dissociation

For limited partners, the consequences are as follows:

Answer 34

(1) the person’s rights as a limited partner end;
(2) the obligation of good faith and fair dealing as a limited partner continues but only as to matters arising and events occurring before the dissociation
(3) any transferable interest owned immediately before dissociation is owned by the dissociating limited partner as a mere transferee; and
(4) obligations to the limited partnership or the other partners continue but only to the extent the obligations were incurred while a limited partner

Question 35

If a general partner is dissociated from a limited partnership and the limited partnership is not yet dissolved, converted, or merged out of existence, the limited partnership will be bound by transactions entered into by the dissociated general partner only if:

Answer 35

(a) the transaction occurred within two years after the dissociation;
(b) the transaction would have bound the partnership if performed before the dissociation; and
(c) at the time of the transaction, the other party reasonably believed that the dissociated partner was then a partner and does not have knowledge or notice of the dissociation.

Question 36

A limited partnership is dissolved and its activities must be wound up upon the occurrence of any of the following:

Answer 36

(1) an event specified in the partnership agreement;
(2) consent of all limited and general partners
(3) the dissociation of a general partner IF:
(a) the limited partnership has at least one remaining general partner AND: all partners (general and limited) consent to dissolution
(b) the limited partnership has no remaining general partner AND 90 days has passed without all limited partners consenting to continue its activities and at least one general partner being admitted.
(4) the passage of 90 days after the dissociation of the limited partnership’s last limited partner unless before the end of the 90 day period the limited partnership admits at least one limited partner; or
(5) the Department of State administratively dissolves the limited partnership.

Question 37

On application by a partner (general or limited), a court may order dissolution of a limited partnership if:

Answer 37

(1) there is wrongdoing; or
(2) if it is not reasonably practicable to carry on the activities of the limited partnership in conformity with the partnership agreement

Question 38

After dissolution, a limited partnership is bound by a general partner’s act IF:

Answer 38

a. the act is appropriate for winding up the partnerships activities
b. the act would have bound the corporation before dissolution AND the other party did not have notice of the dissolution.

Question 39

After dissolution, a limited partnership is bound by the act of a dissociated general partner IF, in addition to the requirements for being bound by an act of a non-dissociated general partner (above):

Answer 39

a. less than two years have passed after the dissociation; AND
b. the other party did not have notice of the dissociation and reasonably believed the person acted with the authority of a general partner.

Question 40

Like a dissolved general partnership, a dissolved limited partnership continues to exist but only

Answer 40

for the purpose of winding up its business.

Question 41

If a dissolved limited partnership does not have a general partner to manage the winding up of the limited partnership’s business, the limited partners who own a majority of the distribution rights as limited partners may:

Answer 41

agree to appoint a person to wind up the LP’s activities

Question 42

In winding up, the order of payments are as follows:

Answer 42

Creditors (including partners that are creditors) and then any surplus will go to partners in proportion to the value of each partner’s contribution

Question 43

Suppose that a limited partnership’s assets are insufficient to satisfy all of its obligations. Then those remaining unsatisfied obligations must be satisfied by:

Answer 43

contributions from all remaining general partners (in proportion to his/her right to receive distributions) but not from remaining limited partners